Trends in current account, Macroeconomics

Assignment Help:

Trends in current account:

A  glance at  the net invisible  account suggests that its  ever-  rising  trend  from 2000-01 did not  only support  the  massive trade deficit but  also  could reduce the current account deficit in  1999-00 and 2000-01. Surprisingly, the continued  rise  in  invisibles  led current account to register surplus  during  2001- 0212003-04. Deterioration  in current account deficit has started  from 2004-05 onwards largely on account of burgeoning trade deficit. Although somewhat erratic trend was witnessed  in  capital account balance  during 1990'it maintained upward movement  in the new millennium leading to overall balance surplus and voluminous foreign exchange  reserves. 

In relative terms, merchandise-trade GDP ratio has nearly doubled i.e.,  from 14.6 peicent  in  1990-91 to 28.9  percent  in 2004-05.  India's  share in world exports also spurted to  0.84  percent  in  2004  from  0.52  percent in 1990. Invisible  receipts1GDP  ratio from a low of 2.4 percent in 1990-91 reached 7.7 percent  in 2001-02  and  further rose  to  11.2 percent  in  2004-05. Another indicator  current receipts as a proportion  of  current payments rose from 71.5 percent  in 1990-91 to 96.4 percent  in  2000-01; exceeded  100 percent in 2001-0212003-04 but fell  to  95.7 percent  in  2004-05.The'most  worrisome current account deficit/ GDP ratio which had worsened to  3.1  percent  in 1990-91 improved considerably during 1990s and was hardly 0.6 percent in 2000-01. Subsequently, a sustained  rise  in net  invisible surplus turned  the current account  into surplus rising  from 0.7 percent of GDP in 2001-02  to 1.2 percent  in  2002-03 percent  and  1.7 percent in 2003-04.

However  in 2004-05, current account deficit as a proportion of GDP reached 0.9 percent and is likely to maintain the same  trend in 2005-06, particularly on account of massive trade deficit. There has been considerable improvement in debt and debt service ratios over the 1990s  and India has gained a high degree of  credit- worthiness in the world economy. Table 18.2 exhibits  invisible  items by category of transactions during 2001-21 2004-05. While non-factor  services have  shown some erratic  trend,  these nevertheless  registered a massive surplus in 2004-05. Exports of software  and related services doubled from 2000-01 level to reach $12.8 billion in 2003-04 and a massive $1  7.2 billion in 2004-05. Liberalisation  oftravel abroad has put the net  receipts from travel  in  the red  in 2004-05. The deficit in investment income is on account of repayments of debt and profits &  dividend payments. Not surprisingly, private transfers  (NRIs  remittances)  net balance showing a larger chunk of the net  invisibles during all these years.  In  2005-06, an estimated $25 billion is expected on this account.  

2337_Trends in current account.png


Related Discussions:- Trends in current account

Types of taxes and laffer curve, Types of Taxes Which a Government can impo...

Types of Taxes Which a Government can impose on the citizens are as follows: With the theory of taxation covered, we can now move towards the actual menu of the taxes the gover

Explain production possibility curve & competitive firm’s , (a)   Explain t...

(a)   Explain the meaning of efficiency in economics and use a sketch diagram to illustrate its attainment by reference to the Production Possibility Curve.   (b)  Refer to the

Traditional or a roth ira, Suppose one of your clients is four years away f...

Suppose one of your clients is four years away from retirement and has only $1,500 in pretax income to devote to either a Roth or a traditional IRA. The traditional IRA permits inv

Circular flow of income in a simple economy income consumed, The circular f...

The circular flow of income in a simple economy where all income is consumed  The operation of forces in an economy can be expressed in the form of a circular flow of incomes a

What is gross national product, What is Gross National Product? Gross...

What is Gross National Product? Gross National Product (GNP): It measures the value of output produced through a country is citizens anywhere within the world, in a speci

How can we determine fixed exchange rate, How can we determine fixed exchan...

How can we determine fixed exchange rate If a nation has a fixed exchange rate (say against a specific currency), the government or central bank may change this fixed exchange

Goods services will be produced and sold in the us, Who decides what goods ...

Who decides what goods services will be produced and sold in the US? Ans) It is mostly the American consumer. The US government also plays a big role in the nation's economy, co

Discuss about real verses nominal gross domestic product, Discuss about rea...

Discuss about real verses nominal gross domestic product. Real verses Nominal Gross Domestic Product: Real Gross Domestic Product: the value of the concluding goods and se

Lorenz curve, what do we mean when we say export are exogenous and import a...

what do we mean when we say export are exogenous and import are endogeneos?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd